Fuel price recoveries in South Africa have swung into a solid over-recovery, contrasting the last three months of being deep in the red.
Month-end data from the Central Energy Fund (CEF) shows that both petrol and diesel price recoveries are squarely in the black.
Petrol prices are showing an over-recovery of between 42 and 46 cents per litre. Diesel is sitting with an over-recovery of between R4.93 and R5.57 per litre.
Under typical circumstances, this would be great news for motorists, as the over-recoveries would deliver a significant cut in pump prices.
These are the recoveries at month-end:
- Petrol 93: decrease of 46 cents per litre
- Petrol 95: decrease of 42 cents per litre
- Diesel 0.05% (wholesale): decrease of R5.57 per litre
- Diesel 0.005% (wholesale): decrease of R4.93 per litre
- Illuminating paraffin: decrease of R5.96 per litre
However, due to the unravelling of the government’s temporary fuel price relief from April and May, the recovery data won’t be the only factor in play.
From 1 June, the National Treasury will be reintroducing at least 50% of the R3.00/R3.93 per litre fuel levy it cut to shield motorists from worse hikes in April and May.
Because of this, the petrol price recovery will be undercut by R1.50 per litre, pushing it back into a hike.
For diesel, the over-recovery can comfortably absorb the reintroduction of R1.97 per litre, pointing to a price cut.
If the National Treasury decided to take advantage of the huge swing and reintroduce the full levy, diesel users would still see a cut.
The table below outlines how the June fuel prices could be impacted by the return of the fuel levies.
| June projections | (Under)/Over recovery Mid-month |
50% Fuel tax added back in June | 100% Fuel tax added back in June | Projected change |
|---|---|---|---|---|
| Petrol 93 | R0.46 | (R1.50) | – | (R1.04) |
| Petrol 95 | R0.42 | (R1.50) | – | (R1.08) |
| Diesel 0.05% | R5.57 | (R1.97) | – | R3.60 |
| Diesel 0.005% | R4.93 | (R1.97) | – | R2.96 |
| Diesel 0.05% | R5.57 | – | (R3.93) | R1.64 |
| Diesel 0.005% | R4.93 | – | (R3.93) | R1.00 |
It should be noted that these projections do not include any additional levies, such as the slate levy, which may also come into play, as it did in May,
The price adjustments will kick in from next Wednesday, 3 June, with the Department of Mineral and Petroleum Resources announcing the official changes before then.
Hope returning to the markets
Fuel price recoveries have staged a significant turnaround on relative market stability, albeit with global oil prices on the wrong side of $100 a barrel for most of the month.
Prices have been under continued pressure as the United States’s war in Iran hit a stalemate, with the Strait of Hormuz effectively shut down.
During the conflict, the effective closure of Hormuz — which is subject to blockades by Washington and Tehran — has triggered a global energy shock, with millions of barrels of daily oil supply shut off.
However, prices fell sharply on Thursday as the US and Iran tentatively agreed to extend a ceasefire by 60 days.
While this is not the end of the problem in the regions, markets are betting the truce will hold.
Oil prices dropped toward $92 a barrel, down 19% this month, on optimism that flows through the Strait of Hormuz may resume.
President Donald Trump has yet to agree to the terms of the agreement, according to a person familiar with the matter, after Axios reported that shipping through the strait would be “unrestricted.”
At this stage, it remains unclear how sticking points in the negotiations — including the Islamic Republic’s nuclear program, Iran retaining control over Hormuz, and sanctions relief — stand to be addressed.
The waterway reopening and Iran turning over highly enriched uranium were Trump’s “red lines” necessary for any pact, Treasury Secretary Bessent said.
According to Bloomberg analysis, even if a truce extension is agreed, multiple hurdles remain that could impede the resumption of oil flows.
Among them, mines in the Hormuz waterway must be removed, shut-in fields may take months to restart, and damage to energy infrastructure from drone and missile strikes needs to be repaired.
In addition, vessels would take weeks to reach importing nations, it said.
On the rand front, the unit was slightly stronger following the move by the Reserve Bank to raise interest rates by 25 basis points.
The move was largely expected, with the higher rate delivering a bigger rate differential between South Africa and the US, boosting the rand.
The decision makes South Africa one of the few emerging markets to have tightened policy during the Iran war.
The central bank said the move was needed to bring inflation back to target, after it accelerated sharply in April.
With Reuters and Bloomberg
